A year ago a friend of mine opened a cafe right across the street, serving basically all the same items to our own customer base, cutting our business in half. What can I do to regain the customers who are now splitting their time between us?

The restaurant industry is highly competitive, but knowing that doesn’t make your situation any easier.  First let’s look at the upside.  If you perceive that the local market is too small for two cafes, then your competitor should feel the same pinch—but hopefully from a much weaker footing.

There are a few things you have going for you that your competition does not:

• Cash Flow.  As you know from your early days, restaurant start-up costs are formidable and trying to start a business while having sufficient cash flow to meet operating expenses is a challenge your competitor is no doubt having.
• Staying Power.  Whenever a new restaurant opens people flock there to try it—the hot new thing.  The true test of your long-term prognosis will be whether your competition is able to leverage that visit into regular guests.
• Loyalty.  To be an owner-operator for ten years in this business is a significant accomplishment—congrats!  In order to have made it a decade you must have great relationships with your purveyors, the university, the community, your employees and your regular guests. 

In terms of advice, develop some promotions to reward loyal guests and focus on the key differences that provide you competitive advantage.  Do what you can to promote the loyalty of your regulars, employees and suppliers to get you through this challenging time.

Jennifer Maeng, who owned the restaurant Seoul Station on one of the most restaurant-dense blocks in New York City, St. Mark’s Place, advises, “You can't prevent a competitor from selling similar items or stealing your customers.  But what you can do is provide a reason for your customers to come to your business instead of your friend’s. For example, as it is a small university town, focus on promotions like student discounts or late night discounts. Stay in tune with how your friend is operating and see what she is doing to draw in business. Another option would be to openly discuss this situation. If you are sharing a customer base, she is not maximizing her business either.”  

Some friend! More on handling competition here.

April 7, 2011

The Advice Guy is Jonathan Deutsch, Ph.D., associate professor of culinary arts at Kingsborough Community College, CUNY and public health at the CUNY Graduate Center. He is the author or editor of five books including Culinary Improvisation (Pearson, 2010).